According to The Scoop report, Professor Hong Ki-hoon of Hongik University stated that cryptocurrencies like Bitcoin should not be considered “safe-haven assets,” level of Gold, dollars, or even the US Treasury bond. However, he acknowledged that volatility in the financial markets is causing more money to accumulate in the crypto market during the global pandemic. The price of the leading cryptocurrency, bitcoin, has been quite volatile in the time of the pandemic. South Korean experts have argued that cryptocurrencies do not qualify as a safe-heaven for many reasons and volatility being one of them.
“Cryptos do not qualify as safe-heaven.”
Hong, from the Business Administration department of Hongik University, said that for an asset to qualify as a safe-haven, two conditions must be met. The first is the volatility of the asset’s value must be low, and second, when market volatility is expected to increase, the value should rise. Therefore, cryptos do not meet these conditions. The professor further explained that the reason for the increase in the volume after the markets crashed was that the spirit of investing in higher volatility worked to compensate for the depreciated asset value.
The Crypto industry is not regulated adequately.
The professor also raised concerns regarding “market manipulation.” It states that the crypto environment is not sufficiently regulated within the country. They believe the market’s current popularity does not alleviate the concerns of investors who hesitate to buy cryptocurrencies. South Korea’s Ministry of Economy and Finance said on May 27 that they are preparing to amend the nation’s Income Tax Law. This move could affect crypto profitability within the country. South Korea is currently among the top countries that have embraced the crypto industry. The South Korean parliament had earlier passed a law that made crypto trading legal in the country. The Asian country is also planning to introduce taxation on crypto revenues.